Virgin Hotel developer digs into Mid-Market with revived plans for new 10-story hotel

By Katie Burke – Food/Hospitality/Retail Reporter, San Francisco Business Times

Nov 13, 2017, 4:27pm PSTUpdatedNov 16, 2017, 1:09pm PST

The developer behind SoMa's long-awaited Virgin Hotel is kickstarting plans for a new 10-story hotel in Mid-Market.

The San Francisco Planning Commission is ready to approve Paradigm Development Group's proposal to demolish the former Kaplan’s Surplus & Sport Goods at 1055 Market St. to make room for a new 160-room hotel on the site.

Paradigm — which developed the 174-room Hampton Inn at 942 Mission St., the Holiday Inn at the San Francisco International Airport as well as the soon-to-be-delivered 215-room Virgin Hotel — purchased the site in 2014. It has spent the past several years working to get its hotel plans there approved.

The proposal also includes 2,000 square feet of ground-floor retail, ground-floor public space and, of course, a rooftop deck. The project is expected to create 25 full-time and 10 part-time positions. Stanton Architecture's Michael Stanton is the lead architect for the development.

Senior Planner Claudine Asbagh said the city is ready to support the project now that the design has been adjusted to address concerns about fitting in with the historic district. Asbagh said Paradigm still needs to get through a few more steps, including getting building permits, to break ground. Those steps could add several months to the timeline, she said.

The developer, who did not respond to requests for comment, stated in its proposal that the new hotel "could achieve an initial occupancy of 80 percent in 2019, with an increase to 83 percent in 2020." Paradigm based those projects on a CBRE Hotels market-demand study. The new property is expected to command a higher-than average occupancy rate given that its a "brand new, high quality hotel with a great location."

San Francisco's occupancy rates averaged 85.5 percent throughout 2016, according to San Francisco Travel, with room rates sticking to about $252 per night.

The proposed development is yet another notch in San Francisco's lengthening belt of incoming hotel projects.

Two hotels opened over the past few months — the 159-room Hotel Via and the 134-room Proper Hotel. Next year's completion of the Yotel San Francisco and Hyatt Place will deliver a combined 470 rooms in 2018.

"It does seem like we have a lot of hotels coming through," Asbagh said of the growing pipeline of new projects. "There has definitely been an uptick in proposals, but in order for the [planning] commission to approve them, it needs to be determined whether there's a market for it."